Government plans to change railway land use policy & reduce LLF to 3.5%

01 May 2022

The government is expected to change the railway land use policy and reduce the industrial land licence fee (LLF) from 6% to 3.5%.

The strategy is likely to promote the strategic disposal of state-owned firms Container Corporation of India Ltd by making the deal more beneficial for stakeholders (Concor).

According to media sources, private parties requested the planned LLF cut, and the notion would be given to Cabinet for approval soon.

The Ministry of Railways is also likely to increase the lease term from five to twenty years.

Indian Railways has agreed to decrease the post-Concor divestiture land licence charge to 3.5%.

The proposed adjustments were agreed upon during a meeting last week attended by officials from the Department of Investment and Public Asset Management (DIPAM), the Railway Ministry, Concor, and NITI Aayog.

Currently, the Ministry of Railways is creating a detailed proposal that will be presented to the Cabinet for approval, following which the government would be able to publish an expression of interest for Concor.

Lalit Chandra Trivedi, an ex-officer of the Indian Railway Service of Mechanical Engineers, and the Chairman of the Rail Division of the Indian chapter of the Institute of Mechanical Engineers told the media that this is a long-awaited desire for a faster disinvestment process.

If approved by the government, the disinvestment process is likely to get a substantial boost.

He said because of the high LLF, the value of embedded land has risen to the point that it discourages entrepreneurs from buying enterprises.

Trivedi informed that the idea plans to cut the land licence price to 3% and lengthen the lease time by 20%. Both of these actions are positive.

Although it's worth noting that the railways' LLF policy initially only applied to land leased for commercial purposes, such as opening retail outlets like shops, bookstores, and kiosks, in fiscal year (FY) 2021, it was broadened to include container business (industrial use).

Concor is a container transportation and handling company that is regulated by the Ministry of Railways. It also runs logistics hubs such as dry ports, container loading stations, and private freight terminals.

It now operates 61 container facilities, 26 of which are leased on a per-container basis on rail land.

The company benefited from the earlier concept of LLF payment when compared to other private container terminal operators. The payment was previously dependent on Concor's volume.

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Also read: Railways deploys 86% of open wagons for coal transportation

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